Profit slips at Disney, but parks business continues to grow

A drooping movie studio pulled down profits at the Walt Disney Co. during the final three months of 2012, but business at the company's theme parks continued to grow.

The entertainment company said Tuesday it earned approximately $1.4 billion in the three-month period that ended Dec. 29, the first quarter of Burbank, Calif.-based Disney's fiscal year. That was down 6 percent from a year earlier, when Disney made nearly $1.5 billion.

Total sales rose 5 percent for the quarter to $11.3 billion.

Disney Chairman and Chief Executive Officer Bob Iger praised the results as a "solid start" to the new financial year. "We're enthusiastic about the year ahead," he added during a conference call with analysts.

The performance of Disney's parks-and-resorts division, the source of about a third of the company's revenue, continued to improve during a quarter that included most of the important Christmas travel period.

Operating profit at Walt Disney Parks and Resorts rose 4 percent for the quarter, from $553 million a year ago to $577 million. Revenue jumped 7 percent, from less than $3.2 billion to almost $3.4 billion.

Combined attendance for Walt Disney World and Disneyland rose 4 percent, increasing significantly at the Southern California resort, which continues to draw crowds to a new Cars-themed land. Attendance was up by just "a hair" in Orlando.

Domestic hotel occupancy slipped four percentage points to 81 percent, as Disney added about 2,000 rooms in Orlando with its new Disney's Art of Animation Resort. But per-room spending, which includes average nightly rates, climbed 4 percent.

Although attendance has been largely stagnant at Disney World in recent months, the company said it has improved during the current quarter. Iger said the first phases of its Fantasyland expansion have been "extremely well received" by travelers and has helped the company push more-aggressive price increases.

Iger also expressed confidence in the company's $1 billion bet on a vacation-planning system, dubbed "MyMagic+," that will allow guests to reserve ride times months in advance of their trips and to use wireless wristbands known as "Magic Bands" as all-in-one park tickets, room keys and credit cards.

Iger said he had personally tested some of the new system in Orlando last week. While it remains in a "test phase," Disney says many of the main components will roll out to visitors during the next few months.

"It gives us the ability, with the voluntary information that you provide to us, to enable personalization and customization," Iger said.

Disney said domestic hotel bookings for the current quarter are up 4 percent, at prices that are higher than a year ago by "high single-digits" percentages.

The company also singled out the new Disney Fantasy cruise ship for propelling profit growth. The 4,000-passenger ship was launched last March and is sailing weeklong itineraries out of Port Canaveral. But the company also acknowledged that overall cruise prices fell for what is now a four-ship fleet, as it had to use discounts to fill sailings out of Galveston, Texas, aboard the older Disney Magic.

Much of Wall Street's interest in Disney's first-quarter results centered on the company's cable-TV networks — particularly sports giant ESPN — which are Disney's largest division and have been the principal fuel for its profit growth in recent years.

Disney's cable results cooled considerably during the period, with profit slipping in large part because ESPN had to pay higher prices to acquire sports-programming rights. Still, higher advertising rates at broadcast network ABC helped Disney's combined media networks grind out a 2 percent increase in operating income, to $1.2 billion.

Operating profit at Disney's film division tumbled 43 percent to $234 million on lower DVD sales and higher marketing costs. But executives trumpeted the unit's future film slate, following Disney's roughly $4 billion purchase of Lucasfilm Ltd., which will include both Star Wars sequels and standalone movies based on the Star Wars universe.

Operating income at Disney's consumer-products business rose 11 percent to $346 million, driven by sales of Marvel Entertainment-related merchandise. And Disney's newest and smallest unit, interactive media, finally swung to a profit, eking out a $9 million gain in part on the sale of Disney-branded mobile phones in Japan.